One problem with cost-plus regulation is that:
A)there is no way for a regulated firm's owners to recoup their opportunity costs.
B)it blunts regulated firms' incentives to cut costs.
C)government ownership is often inefficient.
D)consumers would be willing to pay more for higher quality goods.

Question

Quizplus · Accepted Answer

Cost-plus regulation blunts firms' incentives to cut costs because if a firm adopts cost-saving innovations, the government will force the firm to lower its prices.

One Problem with Cost-Plus Regulation Is That